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Budget demands highlight how landlords can avoid tax

Landlords who want to avoid tax need to think carefully and plan out how they go about paying less. There are ways to get around big tax bills that are perfectly legal, but it takes a bit of thought.

As the Association of Residential Letting Agents (Arla) points out, it is because landlords in the private rented sector are not treated like other businesses that they end up paying out large amounts to the Treasury. As such, some face tax bills of up to 28 per cent when selling a property, which can hamper reinvestment.

Arla operations manager Ian Potter says: "Landlords play a vitally important role in providing housing in the UK, however, they are not treated as businesses by the Treasury and therefore can't take advantage of tax relief available to other SME's when looking to reinvest in their portfolio."

He notes that helping landlords avoid tax is even more important as demand in the private rented sector (PRS) soars. Lower tax bills would mean more money to invest in new properties.

"Demand for private rented housing continues to grow, with 3.4 million tenants living in the private rented sector - an increase of over one million tenants since 2005," explains Mr Potter. "The tax system can be used by the government to incentivise investment in housing stock in the PRS, and therefore improve the conditions in which those 3.4 million tenants live."

Arla is calling on chancellor George Osborne to do something about it in the forthcoming Budget. It is demanding rented property be treated as an entrepreneurial business activity for Capital Gains Tax purposes.

The organisation is also calling for the reintroduction of roll over relief for landlords looking to reinvest in the private rented sector and a reassessment of the "slab" structure of Stamp Duty to create what Mr Potter argues would be a "fairer, more logical system".